Don't believe every property forecast you read: Hotspotting's Terry Ryder
One of most bemusing factors of modern media is that people with appalling credentials at forecasting things are given a free ride by journalists.
In a sensible world, only credible people would have their forecasts held up before the public as something worthy of attention. In this utopia, journalists would check on the track record of forecasters before publishing their latest predictions.
On that basis, the American doomsday merchant Harry S Dent would never feature in Australia media. Every time he visits, which sadly is often, he forecasts a disastrous collapse in our property prices in the next 12 months.
Nothing like that ever happens but each time he makes this recurring forecast, he gets acres of free publicity. No doubt he will next time as well. The reality is that few journalists care too much if the prediction is outlandish or if the forecaster is someone who invariably gets it wrong.
The priority is the clickbait headline. Anyone seeking cheap publicity can make a wackadoodle prediction – prices will fall 40% or young families will never be able to buy a home ever again - safe in the certainty that no one will check later to see how their forecast turned out and hold them to account.
Here are some recent forecasts or observations about real estate matters which received widespread media attention but are doomed to be proven off target:- “Missing migrants” will “choke” the housing rebound” (The Australian): “Weak population growth due to low immigration could drive a slowdown in the housing market” (The Courier-Mail): Economists and other non-specialists continue to obsess over the absence of overseas migrants and the view that this should be impacting housing markets. It’s very naughty of property markets not to collapse on cue.
One of the factors they’ve overlooked is that returning ex-pats have more than compensated for the lack of overseas migrants buying homes. And when international borders do re-open, I believe there will be an avalanche of migrants heading to Australia, creating a second wave of buyer demand which will prolong the current upcycle.
One of the proponents of the population furphy in recent media coverage is the nation’s worst forecaster of real estate outcomes, Shane Oliver of AMP Capital. Keep in mind that 12-15 months ago he was forecasting a collapse in property prices. “FHBs will be squeezed out of property market by investors” (The Courier-Mail) and many others: Media outlets struggling for a headline can always resort to the hardy annual that young Australians are doomed to a lifetime of renting, with investors the villains of the piece. This has been a recurring theme in Australian media for decades. And yet the past 12 months has been the most prolific period ever for first-time buyers, helped by high levels of government assistance.
Prices are rising across the nation and somewhat inevitably media has turned this into a crisis because FHBs, allegedly, will never again be able to afford home. Investors, as usual, are the scapegoats
The reality is that this dramatic escalation in prices in the past 6-12 months has been generated by owner-occupier buyers, including FHBs, with investors largely absent. “House price growth tipped to slow despite the RBA cash rate call” (Smart Property Investor); “End of the property boom, experts say” (realestate.com.au); “68% of experts says prices will peak this year” (various media); “Is the housing boom about to bust?” (The Age) and many others: There appears to be an unofficial competition to be the first the call the end of the boom, with the level of interest rates the prime influence.
When the national average growth in property values was slightly lower in April than in March (according to one research source), “experts” rushed to declare the end of the boom. But May produced another uplift in the rate of growth. Oops. Then, again, when the rate of national growth in June was less than May, there was another “the boom is over” chorus. All this was, rather foolishly, based on month-to-month data from one source. Media is very liberal with its use of the word “expert”.
Finder’s regular surveys of “experts”, which includes the one that found that “68% of experts” expect prices to peak soon, do not include many people who deserve the title of expert with regards to real estate. Most of them are economists and academics – there’s hardly a genuine expert among them.
“Almost a third predict rate rise over 12 months – ANZ survey” (Mortgage Business); “Why interest rates could be set to rise in 2022” (Fairfax Media); “ANZ tips early rate hike” (The Australian) and many others: Media is obsessed with interest rates and there is daily speculation that the official rate will rise.
The Reserve Bank governor Philip Lowe keeps repeating that he doesn’t see an interest rate increase before 2024, but “experts” eager for media mileage persist with their speculation that the cash rate will go up much sooner. Apparently they believe Lowe is lying. I don’t believe consumers share journalists’ fascination with the level of the official interest rate. For them, the day-to-day speculation is pointless and boring.
The implication in much of the coverage is that if the official interest does rise, the property boom will end. This is based on the mistaken belief that “record low interest rates” have caused the strong market, which is kindergarten analysis delivered by “experts”. There is also constant speculation about an intervention by APRA, although there is no indication that current lending standards would warrant it.
“Property buyer and developers should be quaking in their boot” (AFR): This rather sensationalist article in the increasingly-tabloid Financial Review was based on the notion that “sharply rising interest rates and falling population growth” would precipitate a crash.
It was also predicated on the theory that we’ve had a national property boom for the past 25 years and that FHBs can no longer afford to buy. Much of the rhetoric in the article was based on the thoughts of prolific media commentator Chris Richardson from Deloitte Access Economics, who loves an opportunity to deliver a pithy five-second grab for television and other media. Yes, another “expert”. This article was sensationalist and lacking in substance, like so much coverage of real estate.
